Tuesday, August 2, 2016

Sales Tax Holiday for Back-To-School is This Weekend

It's that time of year again in the sunny south when the temperature hovers around 100 degrees daily and the humidity almost feels like a steam shower.  Oh yeah, it's also time for kids to return to school in Alabama.  Hard to believe, but many school systems begin their school year in the next week.  For that reason, Alabama's now annual Back-to-School Sales Tax Holiday is scheduled for this coming weekend, August 5-7.

As part of the holiday, state sales taxes, and the sales taxes of many local jurisdictions, are waived on the purchase of certain specified goods, including items such as clothing, sports equipment, computers, and school supplies.  This year, the Alabama Department of Revenue reports that 293 local taxing jurisdictions are participating in the tax holiday.

For a complete list of the goods that can be purchased tax free and the local jurisdictions participating in the tax holiday this year, click here.

Friday, May 13, 2016

Bad Caribbean Boat Cruise Has Positive Outcome Before Alabama Tax Tribunal

The Alabama Tax Tribunal recently decided the case of DBI Marine Properties, LLC v. Alabama Department of Revenue.  For the Final Order, click here. 

In that case, the ADOR was attempting to impose Alabama use tax on the purchaser of a 68 foot Hatteras 68 Convertible boat.  The boat was delivered to the taxpayer in New Bern, North Carolina, where additional equipment was installed on the vessel.  Once seaworthy, the boat was scheduled to be used as a charter fishing vessel in the Caribbean.  Unfortunately, on its initial voyage, the boat developed mechanical difficulties and had to be returned to the manufacturer for repairs.  Apparently, at some point in the return process, it was briefly moored in Alabama.

The Tax Tribunal accurately determined that because the boat was purchased for first use outside of Alabama, and because there was no evidence that the vessel was ever substantially used in Alabama's waters, the Alabama use tax could not apply.

Wednesday, May 11, 2016

Reminder on Tax Exemption Available for Alabama Churches and Noprofits

Alabama is one of only a handful of states that imposes its sales and use taxes on churches.  It also imposes sales and use taxes on most nonprofit entities.  In addition, it imposes utility and mobile telecommunications taxes on churches and nonprofit entities.  Ironically, it does exempt churches from income and ad valorem property taxes, but no express exemption exists from sales, use, utility, or mobile telecommunications taxes.

We can argue about whether it is proper to impose taxes on such charitable organizations, many of which are serving to relieve some of the burdens of state and local governments to provide services to those less fortunate. Argument can be made that all Alabama churches should be exempt, as are churches in most states, from all state and local taxes. A few brave souls would argue that churches should not be exempt from tax at all.  Regardless of your position, Alabama made the choice long ago not to provide such a general exemption from several of its taxes for Alabama churches and most of its nonprofit entities.

There is, however, at least one option by which Alabama churches and nonprofit entities can obtain exemption from state and local sales, use, utility, and mobile telecommunications taxes and save significant money to use in their charitable works.

Alabama churches and nonprofit entities have the option of forming a united appeal fund, which can not only bolster the organization's benevolent work, but also allow it to become exempt from all Alabama taxes, including sales, use, utility, and mobile telecommunications taxes.  This can result in a substantial savings to the overall annual budget of the organization (almost immediately if a building or renovation project is to be undertaken soon or other large dollar purchase is about to take place), especially when you consider that combined sales and use tax rates are at or above 10% in some jurisdictions in Alabama.  For more information on the united appeal fund process, call us or click here.

Two separate Alabama Department of Revenue Administrative Law Division cases have upheld the use of a united appeal fund structure in this manner previously and many churches and charities across Alabama have chosen to establish united appeal funds to benefit their activities.

While united appeal funds are not for every church or charity, at least some churches and charities do have an option to obtain exemption under Alabama law.

Alabama Court Rules Sales by Photographer NOT Subject to Sales Tax

The Alabama Court of Civil Appeals has recently upheld a decision by the Jefferson County Circuit Court and determined that a photographer does not have to collect and remit Alabama sales tax on its sales of tangible personal property sold in conjunction with the provision of nontaxable services.  Interestingly, the taxpayer averred that it charged its clients based on time and resources in providing services and not on the number, size, or type of photographs actually produced.  It should be noted that most of the sales in question were in a commercial setting, rather than photographs for individual customers.

This ruling, to some extent, appears to contradict previous rulings from the Alabama Tax Tribunal, formerly known as the Administrative Law Division of the Alabama Department of Revenue, on similar issues. 

It will be interesting to see if the decision is appealed to the Alabama Supreme Court and if that court decides to uphold the decision of the Court of Civil Appeals.

For a copy of the Court's ruling, click here.

Monday, January 4, 2016

Alabama Department of Revenue to Hold Hearings on Proposed Regulations

The Alabama Department of Revenue will hold hearings on January 13th in Montgomery regarding several proposed regulation changes.  Click here for a copy of the Department's notice of the hearings and the list of regulations to be considered.

Included on the list are amendments to existing regulations concerning information returns, voluntary withholding of Alabama income tax from nonwage payments, apportionment and allocation of new income of financial institutions, printers (sales and use taxes), and simplified sellers use tax remittance program.

Alabama's Dwindling Gasoline Tax to be Addressed

It appears that momentum is building to address the faltering funding of roads in Alabama in the upcoming 2016 General Session of the Alabama Legislature, perhaps including an increase in gasoline taxes.  Alabama's gas tax has not increased since 1992.  In the meantime, significant improvement in the fuel efficiency of vehicles on the roads in Alabama has reduced the amount of funds available for road repairs and new construction.

As discussed in this article, a series of meetings is scheduled across Alabama by the Alabama Legislature's Joint Transportation Committee to discuss the topic, as well as other transportation issues.  The first of these is to be held in Tuscaloosa County on January 7th at Northport City Hall from 10:00 a.m. to noon.  The meeting is open to the public.

Additional meetings are scheduled in Birmingham, Huntsville, Mobile, and Montgomery prior to the start of the General Session on February 2nd.

Is Unearmarking in Alabama's Budgetary Future?

Why yes, it appears possible that Alabama legislators are going to seriously consider unearmarking some of the funds budgeted each year in Alabama.  As readers may recall, Alabama earmarks far more of its budget from a percentage standpoint than any other state, effectively handcuffing legislators from prioritizing expenditures from year to year to meet the needs of Alabamians.

One bill that has been prefiled, which is discussed in this news article, would unearmark about $400 million in revenue.  It proposes to unearmark some funds for the departments of Mental Health, Public Health, Human Resources, Veterans Affairs and Forestry.

Stay tuned for more on the fast-approaching 2016 General Session of the Alabama Legislature that begins on February 2nd.

Tuesday, August 18, 2015

ADOR Issues Controversial Regulation Taxing Out-of-State Vendors

Recently, the Alabama Department of Revenue issued a proposed regulation that requires out-of-state sellers who have no physical presence in the state (e.g., Amazon) to collect Alabama’s seller’s use tax from their Alabama customers and remit the tax to Alabama. 

Proposed Regulation 810-6-2-.90.03 applies to sellers having “a substantial economic presence” in Alabama.  That presence is defined as having retail sales of tangible personal property in Alabama that “exceed $250,000 per year.” 

A hearing is scheduled on the proposed rule on Wednesday, September 9, 2015, at 2:30 p.m. in Room 1203, First Floor, Gordon Persons Building, 50 N Ripley Street, Montgomery, Alabama.  If the proposed rule becomes final, it will be effective January 1, 2016.

Sunday, August 16, 2015

Alabama's Attorney General Issues Tax Related Opinions

From time to time, Alabama's Attorney General is asked to opine on tax related issues by jurisdictions throughout Alabama. 

Click here for a summary of AG opinions from 2014 and 2015 (to date) that touch on tax-related matters.

2015 Alabama Regular Session Tax Legislation

With the Alabama Legislature just wrapping up its First Special Session of 2015, and while we wait on Governor Robert Bentley to determine which bills, if any, he will sign into law, for a brief summary of tax legislation from the 2015 Regular Session concluded earlier this summer, click here.

Stay tuned for a summary of legislation passed in the First Special Session soon and also news about the Second Special Session, which most observers currently think will be called sometime in September.